Asia-Pacific real estate ‘at a crossroads’

In a research report, TH Real Estate points to “near-record-high” asset pricing and China’s sluggish growth in the face of escalating debt as primary factors behind the sector's slowing gains.

The report puts the region’s projected growth for 2016 and 2017 at 4.1 per cent, based on data from Oxford Economics, down from a peak of 7.6 per cent growth in 2010.

TH Real Estate's head of research for the Asia-Pacific region, Harry Tan, said the volatile economic environment was a factor in the decrease.

“Weakness in economic conditions will translate into softer real estate market fundamentals. This trend is already reflected in falling rents across some markets: prime retail and residential in Hong Kong and Singapore, where economic conditions have worsened over the past year,” he said

The report notes that office and retail space in both Sydney and Melbourne still present “good opportunities” to investors.

Globally, US returns for 2016 look positive following supportive market conditions such as economic growth and “modest” tightening of interest rates, and according to TH associate director of research and strategy Mike Keogh, the European sector may still see positive growth despite recent challenges.

“It would be naïve to underestimate the global economic headwinds in 2016, but it is also worth noting that the eurozone grew 1.5 per cent in 2015, well ahead of expectations at the start of the year, making it entirely possible that a similar situation could occur in 2016,” he said.